Strategic Planning Process Issues
Steve Cantwell, the external consultant hired by Mueller-O’Keefe Home. His task was to assist Mueller-O’Keefe in developing a long-term plan for the house, which would plan further capital development and consider the possibility of including new services. Steve Cantwell’s analysis of the situation and the method of evaluation is consistent with the strategic planning process. Thus, he spent significant amount of time analyzing external market environment and the internal situation in Mueller-O’Keefe. His suggestions were made with consideration of the organizational capabilities and the alternatives available in the market.
However, the process used by Cantwell lacks a solid foundation for further analysis and well-tailored suggestions. In particular, his activities mostly focused on the capabilities and the external environment, without emphasizing the development of a clear mission statement and objectives. Thus, it would be more appropriate to define community service as the highest priority for the home, and to establish that it is more important than competiveness and profitability. This fact would allow shifting the focus from increasing revenues by raising the fees, as it is suggested in the Basic Option presented by Cantwell, to reducing costs and attracting additional funding. Moreover, his ideas capitalize on the already existing development plans and involve only incremental changes, while they fail to incorporate the experience of similar homes and to use industry best practices in order to make significant improvements in the course of the Mueller-O’Keefe’s development. Finally, the suggestions do not include a feedback mechanism that would track continuous improvement and allow evaluating the progress of the home. Thus, regular customer research and cost-benefit analyses could help to monitor whether the proposed changes contribute to the goals of Mueller-O’Keefe and improve the quality of service to the residents.
The absence of a clear mission can be explained by the conflicting interests of the stakeholders as well as by the disagreement between the not-for-profit nature of the organization and the reality of the external environment. The role of the home was changing over the years of its existence and transformed from a home for elderly church members to an excellent basic care provider, which offers an extensive range of services to its clients. The sophistication of the new system and the need for adequate capital management created additional challenges for the financial stability of the home. Despite the fact that the facility is not-for-profit and it was closely affiliated with the Evangelical Free Church, the mission of the home had to incorporate profitability aspirations as well as the continuous improvement in term of cost and care provision in order to insure company’s survival and to endure the competition from the institutions that offer similar services. In particular, the Mueller-O’Keefe’s promise of providing the highest quality service is not consistent with the low fees in the home and with the high maintenance expenditures related to the outdated infrastructure. Therefore, customer care often falls short of the expectations due to insufficient funding, as it can be seen from the interview with Mr. And Mrs. Miller, the residents of the retirement village.
Since Mueller-O’Keefe Home does not have a coherent mission, there is a strong need to develop a mission that would incorporate the strategic orientation of the organization, its origin, close connection with the church as well as inspire further improvements, and accommodate future innovation. Only with the presence of such a statement, which could give Mueller-O’Keefe a sense of direction, the home will be able to move forward and to develop its long-term plan. Thus, a mission of Mueller-O’Keefe Memorial Home and Retirement Village could be “to provide the highest quality, innovative, sustainable and affordable service to all people, who need it, regardless of income, race or religion.
Strategic Analysis (SWOT)
Strategic Analysis can be conducted by examining opportunities and threats of the external environment, where the company operates, and it internal strengths and weaknesses of the organization. This can be done within the framework of a SWOT analysis.
One of the important threats for Mueller-O’Keefe is the tight competition in the sector. The home is currently competing with two other retirement communities and nine nursing homes. Since Mueller-O’Keefe’s advantage is mostly based on its low-cost structure, in the future the competition with the other organizations will be complicated. Therefore, it is necessary for Mueller-O’Keefe to expand its activities in other fields and to emphasize the quality of care in the strategy in order to obtain competitive advantage and to remain attractive for the customers.
The average age of the Mueller-O’Keefe residents, especially in the village, is below the national average, which can indicate a larger potential market and an attractiveness of Mueller-O’Keefe. However, with the decline in the average age of the inhabitants, the length of their stay in Mueller-O’Keefe tends to extend. This fact has a negative impact on profitability of the village, especially after entrance fees completely depreciate and the cost of the village houses exceeds their market value.
One of the opportunities for the development of the home is the demographic situation in the country. The rapid increase in the proportion of the population above 65 ensures the demand for beds in Mueller-O’Keefe. Today, more than 13% of Americans are older than 65 years and this number will continue to increase very rapidly as the generation of the baby boomers retires (Jacobsen, Kent, Lee & Mather, 2012). Moreover, the area, where Mueller-O’Keefe is located, is characterized by the rate of ageing above that of the country average. Additionally, approximately 50% of people older than 75 in this area live alone. This percentage significantly exceeds the average national level (one third of the elderly population), which indicates vast opportunities for growth and expansion of the home.
One of the main advantages of Mueller-O’Keefe is the ability to maintain the lowest fees in the county at all levels of care without decreasing their quality standards. This fact makes it very attractive for the potential clients, expands the possible market and helps Mueller-O’Keefe to cope with the competitive pressure.
The financial position of Mueller-O’Keefe Memorial Home and Retirement Village indicates a stable growth in company revenues and only a marginal increase in costs, thus the home can accommodate an expanding community of people that on average stay in Mueller-O’Keefe longer than in other similar facilities. While Mueller-O’Keefe realized a loss a year ago, this result was attributed to the reluctance of the board to raise fees for its residents. A mild increase of the fees managed to bring Mueller-O’Keefe back to profitability. Moreover, the possibility to reduce advertising and promotion cost by relying on the word of mouth, which manages to keep the demand for Mueller-O’Keefe places constantly high, creates an additional opportunity for profitability without reducing the fees.
The rate policy adopted in Mueller-O’Keefe is a unique and an innovative approach to fees in the nursing care industry. The home sets its private fees at the rate no higher than Medicaid ones, thus giving an opportunity to all the inhabitants to afford the home services, which is especially important since 90% of the residents enter Mueller-O’Keefe as self-paid.
Finally, the reputation of the home and the fact that people are willing to move there from the areas that are more distant than an average in the country shows the high demand for Mueller-O’Keefe and ensures their competitive advantage over the rivals.
The inadequacy of the fees paid by the Mueller-O’Keefe’s customers is one of the key problems of the home. While the maintenance cost continues to increase due to an extension in the services provided and due to the depreciation of the facilities, the fees are maintained at the lowest level in the county. While such strategy is consistent with the mission of the organization and aims to protect those living in the village, the discrepancy between fees and costs can be a significant problem for Mueller-O’Keefe’s sustainable development and even survival.
The financial stability of the home is further jeopardized by the fact that the major source of financing the home is the growth of its fund that is regularly revalued at the current market level. While the portfolio holding in the fund is quite diversified, the changes and slow-downs in the financial market can become detrimental for further development of the home. Furthermore, the reluctance of the Mueller-O’Keefe board to use debt as a source of financing limits the possibilities of expansion and does not allow using the market share advantage.
The physical facilities of Mueller-O’Keefe Home are more modest than those of the rivals, which may become detrimental for its competitiveness. The dissatisfaction of current village inhabitants with the personal care facilities in the home becomes apparent from the interview with Mr. And Mrs. Miller and from the observations of Cantwell.
The lack of services and the quality of facilities result in the absence of the continuum of care, thus Mueller-O’Keefe does not offer a smooth transition between total independence and full dependence for the village residents. This service gap leads to further dissatisfaction with the Mueller-O’Keefe Home.
Options for Mueller-O’Keefe Memorial Home and Retirement Village
The solutions proposed by Cantwell represent a comprehensive and gradual process of change that corresponds to the not-for-profit nature of organization and consider the concern for the welfare of the clients in the Mueller-O’Keefe, which is paramount for the company. The three options include both short-term objectives, such as upgrading the financial management system, and the continuous care contracts, as well as long-term initiatives, such as the expansion of facilities and the change in the development of the retirement village plan. Moreover, the third option, Program Initiatives, considers the demands of the Area Agency on Ageing and allows expanding the services offered by Mueller-O’Keefe with only minimal investment into the project, by leveraging on the existing resources and capabilities.
However, the plan of Cantwell has some room for improvement. Firstly, the suggestions introduced are not prioritized; therefore it is hard to identify the changes that should be implemented first. Thus, the modification of the facilities may be much more crucial then the change in the village planning system, since quick deterioration of the facilities can make them unsafe for the inhabitants. Secondly, the changes introduced by the consultant mostly capitalize on the existing processes in Mueller-O’Keefe, while few innovative suggestions are presented in the three options.
As an alternative suggestion to the continuum healthcare that requires significant investment and an extension of Mueller-O’Keefe’s services, the home can look into the recent trend of the informal care-provision (Organisation for Economic Co-operation and Development, 2005) and peer care (Thies, 2009). By initiating programs to help villagers to take care of their neighbours Mueller-O’Keefe can both leverage on the relatively young population of the village residents, and reduce personnel cost, while achieving results in a short time. This solution is beneficial for Mueller-O’Keefe both in the short and in the long-run. In the short-run it can allow keeping costs low and bridging the gap between full independence and full dependence, thus making retirement more attractive. In the long-run this policy can help to accommodate more people in the village without adding personnel and increasing facility costs. Moreover, people will be able to live in the village longer, without the need to transfer into home, where the living cost and conditions are less favourable.
The second option for the development of Mueller-O’Keefe includes an upgrade of the financial system and a reconsideration of the fee levels. However, the policy should be modified only with respect to people, whose stay in the village costs Mueller-O’Keefe more than the market value of their house. In this case, the fees should be increased to approach the true level of expenditures. This scheme will allow partially compensating for the low fees in Mueller-O’Keefe, while it would only affect people, who stay in the village or other facilities longer than the others. In the long-run such approach will help to change the demographics of Mueller-O’Keefe by increasing the age of the inhabitants. In the short-run it can help to reduce costs and to maintain remain competitive.
Lastly, the policy of low advertising expenditures could be modified. While word of mouth is sufficient to attract additional residents to Mueller-O’Keefe, additional publicity could help to attract more sponsorship from local businesses and individuals. Such policy could be beneficial both in the long and short-run due to the reputation of the facility and it could reduce the financial constraints without the need to raise fees.
Jacobsen, L. A., Kent, M., Lee, M., & Mather, M. (2012). America’s aging population.
Retrieved from http://www.prb.org/Publications/PopulationBulletins/2011/americas-
Organisation for Economic Co-operation and Development. (2005). Long-term care for older
people. Paris, France: OECD Publishing.
Thies, K. (2009, March 27). [Web log message]. Retrieved from